Why Nations Fail

Why Nations Fail


Why Nations Fail: The Origins of Power,
Prosperity, and Poverty is a non-fiction book by Turkish-American economist Daron
Acemoglu from the Massachusetts Institute of Technology and political
scientist James A. Robinson from Harvard University. The book applies insights
from institutional economics, development economics and economic
history to answer why nations develop differently, with some succeeding in the
accumulation of power and prosperity, while others fail. The authors also
maintain a website about the themes of the book.
Structure The book is structured into fifteen
chapters: 0. Preface
1. So Close and Yet So Different – Why Egyptians filled Tahrir Square to bring
down Hosni Mubarak and what it means for our understanding of the causes of
prosperity and poverty 2. Theories That Don’t Work – Poor
countries are not poor because of their geographies or cultures, or because
their leaders do not know which policies will enrich their citizens
3. The Making of Prosperity and Poverty – How prosperity and poverty are
determined by the incentives created by institutions, and how politics
determines what institutions a nation has
4. Small Differences and Critical Junctures: The Weight of History – How
institutions change through political conflict and how the past shapes the
present 5. “I’ve Seen the Future, and It Works”:
Growth Under Extractive Institutions – What Stalin, King Shyaam, the Neolithic
Revolution, and the Maya city states had in common and how this explains why
China’s current economic growth cannot last
6. Drifting Apart – How institutions evolve over time, often slowly drifting
apart 7. The Turning Point – How a political
revolution in 1688 changed institutions in England and led to the Industrial
Revolution 8. Not On Our Turf: Barriers to
Development – Why the politically powerful in many nations opposed the
Industrial Revolution 9. Reversing Development – How European
colonialism impoverished large parts of the world
10. The Diffusion of Prosperity – How some parts of the world took different
paths to prosperity than Britain 11. The Virtuous Circle – How
institutions that encourage prosperity create positive feedback loops that
prevent the efforts by elites to undermine them
12. The Vicious Circle – How institutions that create poverty
generate negative feedback loops and endure
13. Why Nations Fail Today – Institutions, institutions, institutions
14. Breaking the Mold – How a few countries changed their economic
trajectory by changing their institutions
15. Understanding Prosperity and Poverty – How the world could have been
different and how understanding this can explain why most attempts to combat
poverty have failed Content
In 15 chapters, Acemoglu and Robinson try to examine which factors are
responsible for the political and economical success or failure of states.
They argue that the existing explanations about the emergence of
prosperity and poverty, e.g. geography, climate, culture, religion or economic
policies, are either insufficient or defective. They support their thesis by
using countries as case studies, which are similar in all the mentioned factors
but still developed differently in term of prosperity. The most incisive example
is Korea, which was divided into North and South Korea 60 years ago and both
countries’ economies have developed completely differently since then.
Further examples are the border cities Nogales and Nogales. By reference to
border cities, the authors analyze the impact of the institutional environment
on the prosperity of people from the same geographical area and same culture.
The major thesis of Acemoglu and Robinson is that economic prosperity
depends above all on the inclusiveness of economic and political institutions.
Only a functioning democratic and pluralistic state which guarantees the
rule of law is able to exploit the ideas and talents, which are spread among the
whole population of a nation. In extractive systems however,
entrepreneurs and citizens have no incentives to invest in and work on
innovations, which are necessary to create prosperity, because the ruling
elites are afraid of creative destruction. Creative destruction would
fabricate new groups which competed for power against ruling elites. Hence,
elites would lose their exclusive access to the economic and financial resources
of a country. The authors bring in the emergence of democratic pluralism in
Great Britain after the Glorious Revolution in 1688 as being decisive for
the Industrial Revolution as an example as well as the fall of the Soviet Union.
Reception =Interviews and presentations=
Acemoglu was interviewed on the EconTalk podcast by host Russ Roberts about the
book in March 2012. Robinson presented the main ideas of the
book at the RSA.=Positive reviews=
Warren Bass reviewed the book for the Washington Post, writing: “It’s bracing,
garrulous, wildly ambitious and ultimately hopeful. It may, in fact, be
a bit of a masterpiece.” Development economist Paul Collier
reviewed the book for The Guardian. He concluded his review by writing: “A
thesis can be summarised, albeit crudely, in a short review. Yet the main
strength of this book is beyond the power of summary: it is packed, from
beginning to end, with historical vignettes that are both erudite and
fascinating. As Jared Diamond says on the cover: ‘It will make you a
spellbinder at parties.’ But it will also make you think.”
Thomas Friedman reviewed the book for the New York Times, concluding his
review by writing: “We can only be a force multiplier. Where you have
grass-roots movements that want to build inclusive institutions, we can enhance
them. But we can’t create or substitute for them. Worse, in Afghanistan and many
Arab states, our policies have often discouraged grass-roots from emerging by
our siding with convenient strongmen. So there’s nothing to multiply. If you
multiply zero by 100, you still get zero. […] Acemoglu worries that our
huge growth in economic inequality is undermining the inclusiveness of
America’s institutions, too. […] When one person can write a check to finance
your whole campaign, how inclusive will you be as an elected official to listen
to competing voices?” Peter Forbes reviewed the book for The
Independent, writing: “This book, by two US economists, comes garlanded with
praise by its obvious forebears – Jared Diamond, Ian Morris, Niall Ferguson,
Charles C. Mann – and succeeds in making great sense of the history of the modern
era, from the voyages of discovery to the present day.”
=Mixed and negative reviews=The negative reviews of the book focused
on the following lines of criticism: The authors didn’t present more
rigorous, statistics-based evidence to support their theories. This critique
appeared in a mixed review of the book by William Easterly in the Wall Street
Journal, that was generally supportive of the plausibility of the book’s thesis
but critiqued the book’s failure to cite evidence to show that their historical
case studies demonstrated their claims, even though some evidence did exist in
the scholarly literature. The authors focused almost exclusively
on institutions as an explanation, and even within institutions, they focused
on a relatively narrow subtype. Jared Diamond wrote that “In their narrow
focus on inclusive institutions, however, the authors ignore or dismiss
other factors. I mentioned earlier the effects of an area’s being landlocked or
of environmental damage, factors that they don’t discuss. Even within the
focus on institutions, the concentration specifically on inclusive institutions
causes the authors to give inadequate accounts of the ways that natural
resources can be a curse. Diamond’s review was excerpted by economist Tyler
Cowen on Marginal Revolution. Jeffrey Sachs objects that other factors
that can also affect growth are ignored. David R. Henderson wrote a generally
positive review in Regulation, but included the criticism that the authors
failed to consider one example of extractive institutions: “A government
of elitists that, claiming to speak for the large less-wealthy majority,
extracts wealth from a small wealthy minority.”
A professional Book Review in charge of Maximiliano E Korstanje exerts a radical
criticism on Why Nations Fail. Far from being objective, the argument of this
book is ethnocentric. Authors fail to recognize that there are many other
nations that are free to choose to live in another way; there is no imperative
stating that all nations should be democratic in order to enjoy the
“benefits” of modern life and a capitalist economy. Indeed,
paradoxically, envisaging democracy as a “universal value” is a betrayal to the
self determination of others the very cornerstone of democracy itself. By
defining a nation’s success as a function of its degree of wealth or per
capita income, corresponds directly to an “ethnocentric” mechanism within the
discipline, aimed at creating a need in non-Western societies, namely, the
“need” to be “developed” and “modern”. There is no genuine attempt to discuss
critically the role of international financial corporations as World Bank in
issuing an unlimited number of loans to the world. Lastly, Acemoglu and Robinson
are not treating the problem of inequality with accuracy and detail. The
GINI coefficient list shows how some Latin American countries as Uruguay are
more egalitarian than United States. In a blog post primarily devoted to Paul
Collier’s book Exodus, Nathan Smith built on some of the preceding critiques
and added a further criticism: “A naïve view of the beneficence of democracy has
long since been ripped apart by public choice economics, yet Acemoglu and
Robinson revive it in the crudest form. People good, elites bad. […] Honest
empirical work on the democracy=>growth causal link suggests that the
effect is basically nil. But Acemoglu and Robinson’s tendentiously fact-packed
and conceptually confusing tome has given development economists a pretext
for taking a more politically correct view.” The critique was publicized by
economist Bryan Caplan on EconLog, who begged readers for their own thoughts on
Smith’s assessment. Awards and honours
2012 Paddy Power And Total Politics Political Book Award
2012 Financial Times and Goldman Sachs Business Book of the Year Award,
Shortlist 2013 Lionel Gelber Prize, Longlist
2013 Arthur Ross Book Award, Honorable Mention
Related work by others The Wealth of Nations by Adam Smith
Guns, Germs, and Steel by Jared Diamond Collapse: How Societies Choose to Fail
or Succeed also by Jared Diamond The Elusive Quest for Growth by William
Easterly The Wealth and Poverty of Nations by
David Landes IQ and the Wealth of Nations by Richard
Lynn and Tatu Vanhanen Violence and Social Orders by Douglass
North, John Wallis, and Barry Weingast The Modern World-System, vols. 1-4 by
Immanuel Wallerstein The God of the Machine by Isabel
Paterson References

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